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Suncor (SU) Misses Earnings and Revenue Estimates in Q2

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Canadian energy giant Suncor Energy Inc. (SU - Free Report) reported second-quarter 2017 operating earnings per share of 9 cents missing the Zacks Consensus Estimate of 18 cents. The company posted a loss of 28 cents per share in the year-ago comparable quarter. Increased costs led to dismal results.

While quarterly revenues of $5.4 billion increased from $4.5 billion in the year-ago quarter, the top line lagged the Zacks Consensus Estimate of $5.6 billion.

Suncor recorded quarterly operating earnings of C$199 million. The company had incurred an operating loss of C$565 million in the year-ago quarter. This was due to higher crude price realizations and strong upstream production.

Suncor Energy Inc. Price, Consensus and EPS Surprise

 

Production

Total upstream production in the reported quarter was 539,100 barrels of oil equivalent per day (BOE/d), up 63% from the prior-year level of 330,700 BOE/d.

Oil Sands operations volume was 352,600 barrels per day (Bbl/d) compared with 177,500 Bbl/d in the year-ago quarter. This was due to production being stopped during second-quarter 2016 as a result of forest fires in the Fort McMurray area.

Production from Syncrude operations was 61,000 Bbl/d in the quarter compared with 35,600 Bbl/d in the year-ago quarter. The increase is attributed to the negative impact of the forest fires during the second quarter of 2016.

Suncor’s Exploration and Production segment (consisting of International and Offshore and Natural Gas segments) produced 125,500 BOE/d. The segment had produced 117,600 BOE/d in the prior-year quarter. Lower planned maintenance at Terra Nova, production from new wells at Hibernia and production from Libya contributed to improved results.

Refinery utilization came in at 94%, compared with 87% in the year-ago quarter.

Product Sales

The company’s refined product sales of 435,500 Bbl/d increased from the prior-year quarter level of 400,200 Bbl/d.

Expenses

Costs related to purchase of crude oil rose to C$2,995 million, up by 12% from the prior-year quarter. The operating, selling and general costs also increased to C$2,240 million, compared with the year-ago quarter figure of C$2,053 million.

Balance Sheet & Capital Expenditure

As of Jun 30, 2017, Suncor had cash and cash equivalents of C$2.35 billion and total long-term debt (including current portions) of C$12.6 billion. The total debt-to-capitalization ratio was approximately 21.8%. The company incurred capital expenditure of C$1.85 billion in the quarter.

Dividend and Share Repurchase

Suncor returned C$533 million to shareholders through dividends and bought back $296 million of outstanding shares in second-quarter 2017.

The company approved a quarterly dividend of 32 cents per share on its common shares, payable Sep 25 to shareholders of record at the close of business on Sep 5.

Updated Guidance

The full-year outlook range for E&P production has been updated to 115,000–125,000 Boe/d from 110,000–120,000 Boe/d due to improved asset performance. 

The full-year outlook range for Syncrude production has been updated to 130,000–145,000 Bbls/d from 135,000–150,000 Bbls/d.  Further the full-year outlook range for Syncrude cash operating costs has been updated to $42.00–$45.00/bbl to $36.00–$39.00/bbl because of the Syncrude fire incident.  

The estimated capex for 2017 has increased from $4.8 – $5.2 billion to $5.4 – $5.6 billion to reflect an opportunity to accelerate the pace of work at Fort Hills, as well as increased costs at Syncrude.

Zacks Rank and Key Picks

Headquartered in Canada, Suncor is a world leader in mining and extracting crude oil from the vast oil-sands deposits of northern Alberta. The company also explores, develops and markets natural gas. Moreover, it operates a refining and marketing business in Ontario and is actively involved in the development of renewable energy sources. The company currently carries a Zacks Rank #3 (Hold).

Some better-ranked players from the broader energy space include Braskem S.A. (BAK - Free Report) , Petróleo Brasileiro S.A. or Petrobras (PBR - Free Report) and SeaDrill Limited (SDRL - Free Report) . While Braskem and Petrobras sport a Zacks Rank #1 (Strong Buy), SeaDrill carries a Zacks Rank #2 (Buy).  You can see the complete list of today’s Zacks #1 Rank stocks here.

Braskem reported an average positive earnings surprise of 107.79% in the trailing four quarters.

Petrobras delivered an average positive earnings surprise of 59.58% in the last four quarters.

SeaDrill reported an average positive earnings surprise of 97.13% in the last four quarters.

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